Facebook may pay up to $US1bn for Israel's Waze

Facebook is in advanced talks to acquire Israeli mobile satellite navigation start-up Waze for $US800 million to $US1 billion, business daily Calcalist reported.

The deal, which would be Facebook's largest acquisition, would give the social networking company a mapping service and allow it to better compete with Google and Apple.

Maps and navigation services have become a key asset for technology companies as consumers increasingly adopt smartphones and other mobile devices.

Waze uses satellite signals from members' smartphones to generate maps and traffic data, which it then shares with other users, offering real-time traffic info.

Due diligence between Waze and Facebook is underway after a term sheet was signed, Calcalist said, adding that talks began six months ago.

Officials at Waze and Facebook declined to comment on the report.

‘Mobile-first’ focus

Facebook's largest deal to date is the September acquisition of photo-sharing app, Instagram. Facebook agreed to buy the company for $US1 billion in cash and stock, though the actual price it paid was $US715 million due to declines in Facebook's share price.

The four-year-old Waze, which has 47 million users, has raised $US67 million in funding to date from firms including Kleiner Perkins Caufield & Byers, Blue Run Ventures and semiconductor company Qualcomm Inc.

"A lot of these companies want to own mapping services as opposed to licensing. The advantage is that you could personalise it to your business," said Raymond James analyst Aaron Kessler.

For Facebook, which has shifted its focus to developing "mobile-first" products, having location-based services is important, said Kessler.

Third acquisition in Israel

There had been media reports earlier this year that Apple was in talks to acquire Waze.

In September, Apple replaced the Google Maps app that once came pre-loaded on iPhones with a new maps service that Apple had created in-house. The Apple maps service contained embarrassing errors, drew fierce criticism from consumers and reviewers, and forced Apple Chief Executive Tim Cook to offer a public apology.

Waze and Facebook partnered in October 2012 when Waze released an updated version of its social mapping and traffic app that allows users to share their drive with their Facebook friends.

Waze has 11 of its 100 employees based in the United States, with the remaining staff in Israel.

This would be Facebook's third acquisition in Israel. It bought Snaptu in 2011 for $US70 million and Face.com in 2012 for $US60 million.

Shares of Facebook were up 1.1 per cent, or 30 cents, at $US27.42 in afternoon trading on Thursday.